I am no expert but generally, I cut until I reach solid metal. Cutting in straight lines makes it a heck of a lot easier to make a nice fitting patch. The fitment of your patch will ultimately dictate how difficult it is to weld up properly. Just remember you don't want to create additional work for yourself. Sometimes you can cut to a location that makes it easier to weld up. Like on my floor board I cut until i reached the flange of the frame rail, that gave me a nice sold piece to weld to. Sometimes the body lines and contours can help prevent warping. Honestly, I dont think there is any one right answer for you, all situations are different and everyone has a different technique. Take your time, dont rush yourself into creating more work.
-Mike